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It's all in the timing: Cash transfers and consumption smoothing in a developing country

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  • Bazzi, Samuel
  • Sumarto, Sudarno
  • Suryahadi, Asep

Abstract

We use a large-scale unconditional cash transfer program in Indonesia to investigate the importance of timing in shaping household consumption responses to fiscal interventions. Timely receipt of transfers yields no expenditure change relative to non-recipients. However, delayed receipt reduces expenditures by 7.5 percentage points. Ignoring heterogeneous timing leads to sizable underestimates of expenditure impacts. After considering several data-driven explanations, we reconcile these findings with models of consumption smoothing in which liquidity constraints imply asymmetric responses to positive and negative shocks. Our results parallel findings on government transfers in rich countries and yield new implications for program evaluation.

Suggested Citation

  • Bazzi, Samuel & Sumarto, Sudarno & Suryahadi, Asep, 2015. "It's all in the timing: Cash transfers and consumption smoothing in a developing country," Journal of Economic Behavior & Organization, Elsevier, vol. 119(C), pages 267-288.
  • Handle: RePEc:eee:jeborg:v:119:y:2015:i:c:p:267-288
    DOI: 10.1016/j.jebo.2015.08.010
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    Cited by:

    1. Prifti, Ervin & Daidone, Silvio & Davis, Benjamin, 2019. "Causal pathways of the productive impacts of cash transfers: Experimental evidence from Lesotho," World Development, Elsevier, vol. 115(C), pages 258-268.
    2. Margherita Calderone, 2017. "Are there different spillover effects from cash transfers to men and women? Impacts on investments in education in post-war Uganda," WIDER Working Paper Series 093, World Institute for Development Economic Research (UNU-WIDER).
    3. Tohari, Achmad & Parsons, Christopher & Rammohan, Anu, 2017. "Targeting Poverty under Complementarities: Evidence from Indonesia's Unified Targeting System," IZA Discussion Papers 10968, Institute of Labor Economics (IZA).
    4. Baird, Sarah & McIntosh, Craig & Özler, Berk, 2019. "When the money runs out: Do cash transfers have sustained effects on human capital accumulation?," Journal of Development Economics, Elsevier, vol. 140(C), pages 169-185.
    5. Beegle, Kathleen & Galasso, Emanuela & Goldberg, Jessica, 2017. "Direct and indirect effects of Malawi's public works program on food security," Journal of Development Economics, Elsevier, vol. 128(C), pages 1-23.
    6. Adama Bah & Samuel Bazzi & Sudarno Sumarto & Julia Tobias, 2019. "Finding the Poor vs. Measuring Their Poverty: Exploring the Drivers of Targeting Effectiveness in Indonesia," World Bank Economic Review, World Bank Group, vol. 33(3), pages 573-597.
    7. Demirdogen, Alper & Olhan, Emine, 2018. "The Timing Impact of Agricultural Support Policies on Farmers’ Stated Intentions in Turkey," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271960, European Association of Agricultural Economists.
    8. Aker,Jenny C., 2015. "Comparing cash and voucher transfers in a humanitarian context : evidence from the Democratic Republic of Congo," Policy Research Working Paper Series 7469, The World Bank.
    9. Brune, Lasse & Giné, Xavier & Goldberg, Jessica & Yang, Dean, 2017. "Savings defaults and payment delays for cash transfers: Field experimental evidence from Malawi," Journal of Development Economics, Elsevier, vol. 129(C), pages 1-13.
    10. Tohari, Achmad & Parsons, Christopher & Rammohan, Anu, 2019. "Targeting poverty under complementarities: Evidence from Indonesia's unified targeting system," Journal of Development Economics, Elsevier, vol. 140(C), pages 127-144.

    More about this item

    Keywords

    Cash transfers; Marginal propensity to consume; Liquidity constraints; Program evaluation;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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